DK Essential Managers - Innovation.pdf

ESSENTIAL MANAGERSInnovation CREATIVITY • CULTURE • CONCEPTS PROCESS • IMPLEMENTATION ESSENTIAL MANAGERS Innovation JOHN BESSANT or by any means (electronic. New York. stored in or introduced into a retrieval system.com 16 Innovation and invention 18 Making innovation happen 20 Meeting challenges . without the prior written permission of both the copyright owner and the above publisher of this book. 375 Hudson Street.Contents London. Munich. New York. New York. mechanical.premiums. Melbourne. Pushpak Tyagi 4 Introduction CHAPTER 1 Understanding innovation 6 Tackling the basics 8 Understanding the benefits 10 Setting a pace for innovation First American Edition. no part of this publication may be reproduced. fund-raising. ISBN 978-0-7566-5555-6 DK books are available at special discounts when purchased in bulk for sales promotions. 2009 Published in the United States by DK Publishing 375 Hudson Street. or transmitted. or educational use. in any form. New York 10014 or SpecialSales@dk. A catalog record for this book is available from the Library of Congress. Ankush Saikia Designer Malavika Talukder Design Manager Arunesh Talapatra DTP Designers Preetam Singh. Color reproduction by Colorscan.com. or otherwise). photocopying. Singapore Printed in China by WKT Discover more at www.dk.For details. Published in Great Britain by Dorling Kindersley Limited. New York 10014 12 Directing innovation 14 Innovating successfully 09 10 11 12 10 9 8 7 6 5 4 3 2 1 ND140—November 2009 Copyright © 2009 Dorling Kindersley Limited All rights reserved Without limiting the rights under copyright reserved above. contact: DK Publishing Special Markets. recording. and Delhi Editor Daniel Mills US Editor Margaret Parrish Senior Art Editor Helen Spencer Production Editor Ben Marcus Production Controller Hema Gohil Executive Managing Editor Adèle Hayward Managing Art Editor Kat Mead Art Director Peter Luff Publisher Stephanie Jackson DK DELHI Editors Alka Ranjan. CHAPTER 2 CHAPTER 4 Planning for innovation Building the innovative organization 22 Innovating strategically 24 Modelling innovation 26 Applying strategic analysis 28 Choosing the right options 30 Building a strategic portfolio 32 Promoting ideas for change 34 Making real-time decisions 52 Laying the foundations 54 Setting an innovation culture 56 Fostering creativity 58 Managing change 60 Involving employees 62 Involving customers 64 Networking for innovation CHAPTER 3 Making innovation happen 36 Moving toward innovation 38 Looking for ideas 42 Making a strategic selection 44 Developing your idea 48 Diffusing your innovation 68 Sharpening your skills 70 Index 72 Acknowledgments . . Innovation—the process of change—is critical to the success of all organizations. large or small. Key elements in successful leadership of innovation include developing a clear strategic vision and communicating it. We have to learn to manage innovation. you will develop the skills you need to become an architect of change within your organization. Unless they keep renewing their products and services. and Innovation provides a framework for doing this. organizations face a stark challenge—change or perish. By using the guidelines and tools in this book. choosing a balanced portfolio of projects. and delivering these projects on time and within budget. Innovation is about human creativity. organized and applied across the organization. and update the ways they create and deliver them. in both the private and public sectors. you need to understand how the innovation process works and how you can mobilize this creativity. hands-on approach. . Most managers understand the importance of the topic. As a manager.Introduction In today’s dynamic and turbulent world. But making it happen requires a systematic. searching for innovation triggers. they risk being overtaken by competitors. Tackling the basics The word “innovation” today appears everywhere—on company websites. you need to understand what it is. learning about agriculture. mastering fire and tool-making. But before you can apply it to your own organization.Chapter 1 Understanding innovation Innovation is vital to the success of any business. TIP LOOK AT ALL AREAS Human history shows that any area of life can benefit from innovation. and in news features. Think about ways of improving even the most wellestablished systems in your organization. in advertisements for everything from hairspray to healthcare. However. that’s something anyone can do—imagination and creativity come as standard equipment for human beings. on the lips of politicians. the concept of innovation remains poorly defined. to change. construction. meaning “to make something new. Working out better ways of hunting. transportation—quite simply. the history of civilization is about innovation. . why it is important.” In principle. while the word itself is popular. And it’s something we’ve been doing since the earliest days when our ancestors lived in caves—the reason that we don’t still live there is because of innovation. Defining innovation The word “innovation” comes from the Latin words in and novare. and how it applies to different business areas. . And finally. But innovation isn’t just about bright ideas. Second. more workable solutions. + IMPLEMENTATION Your idea must become a practical reality before it can benefit your organization. and the rewards are not always obvious. what can we change? You need to understand the options for innovation before you can make decisions on where to focus your efforts. why should we innovate? Innovation always involves risks.Tackling the basics 7 Making innovation practical TIP There’s still plenty of room for ideas to improve the world we live in—and we are still really good at coming up with them. it’s also about putting those ideas into practice. = INNOVATION Successful innovation takes place only when both of these elements are achieved. no matter how strange. First. Understanding the issues Thinking about managing innovation raises three key issues. it will not benefit your organization if it cannot be transformed into a practical change in the work process that increases efficiency or profit. how can we make it happen? The innovation process IDEAS The starting point for innovation is an idea for improving an aspect of your operations. No matter how good the idea. A working definition of innovation would be: innovation = ideas + implementation. KEEP AN OPEN MIND Consider all ideas. in their initial stages. Something that appears totally impractical at first may lead to useful thinking about other. you run the risk of being pushed aside by organizations that do. The same can be said to be true of business organizations as well.8 Understanding innovation Understanding the benefits In Charles Darwin’s famous theory of evolution. survival depends on an ability to change. or more efficient production process gives you an instant advantage. This survival idea may be obvious in a competitive business world—but it is just as important in nonprofit organizations and public services. cheaper. Innovating to survive If you do not change what you create and offer the world (your products and services). ADDED COMPLEXITY Offering something too complex for others to imitate places your product at a premium. you are unlikely to achieve this if you do not offer new products and services in new ways. . RIGHT TIMING Getting into a market early establishes your brand before the competition has time to develop. Those species that do not adapt and change to cope with an altering environment simply die out. And if you want your businesses to grow. NOVELTY IN PROCESS A faster. to producing something before competitors can imitate it. and defend against competitors. and also to development and profit. to completely rewriting the rules of competition in your market. REWRITING THE RULES Offering people something absolutely novel can create an entirely new market. from price to quality) can undermine your rivals. Innovating to make a profit Innovation is essential to survival. PRODUCT OR SERVICE NOVELTY Offering a product no one else has access to guarantees you will have no competition. Profiting from innovation PROTECTING INTELLECTUAL PROPERTY New trademarks and patents generate revenue through fees for their use. . These range from making existing processes more efficient.NEW COMPETITIVE FACTORS Changing the base of your competition (eg. There are many ways in which innovation can improve an organization’s revenue and customer base. 2002. most innovation is it still does very well—sales are about improving the way processes around 14 million pens per day. safety. In service the Crystal ballpoint pen in 1951.10 Understanding innovation Setting a pace for innovation In order to manage the process of making innovations happen. Incremental innovation may not be glamorous and instantly noticeable. most things you might buy in the supermarket are CASE STUDY not “new to the world” products. in the ball point. In but it is still the same old design. And manufacturing. in improving the level and quality of the ways in which it is manufactured— service around a basic formula. Bic introduced of existing products. . but improvements and extensions Incremental innovation The French company. in the plastic used. Bic sold its 100 billionth pen—enough to cover 40 times improving efficiency. importantly. It’s gone catering. In work—fixing bugs in the system. but the result of incremental improvement. making things better in quality and cheaper. the distance from Earth to the and. TIP Innovating in stages The results of innovation can be dramatic—from the first-ever automobile to landing a man on the Moon. Incremental innovation—innovating in small steps—is about improving products and services and the processes we use to make them. But many of these innovations come about not through dramatic changes but by doing the same things a little bit better. This is not a one-time act. and industries such as hotels and it is still going strong today. One way is to look at how much “newness” is involved—from incremental small steps to radical leaps forward. ENCOURAGE HIGH INVOLVEMENT Everyone is creative—make sure you are tapping into this rich resource by asking employees for their ideas and suggestions to improve what your organization is trying to achieve. lined up end to end. but it is by far the most common kind of innovation. it is important to understand the different ways in which change can be categorized. Moon. In this field it is not a case of “one size fits all”—you need to tailor your approach. innovation is about through all kinds of incremental “doing what we do better”— improvement—in the ink formulation. reducing cost. quality. For example. market. HOW TO. Radical innovation is much riskier and often takes specialized knowledge.. more reliable. cars and railroads. Incremental innovation requires you to mobilize large numbers of people to make small improvements. and manage them under the same roof. Arrange them by impact area: product. A successful organization should not limit itself to either incremental or radical innovation. For example. the Internet. Now. and processes don’t happen every day. service. . Significant examples include electric power.Setting a pace for innovation 11 Innovating radically Doing what we do better will get us a long way— but from time to time something comes along that changes the whole nature of a business or market. It tends to be managed by dedicated teams.. BUILD AN INNOVATION PORTFOLIO List all the possible innovations you could make. but they do have a big impact. and it takes a long time for them to be perfected. and self-service shopping. and forms part of the mainstream activity in most organizations. however. and more efficient versions of the original design. but be prepared to engage in both. the 20th century saw decades of incremental innovation of the standard filament light bulb to create smaller. Pick out easy to implement and high-impact ideas to work on first. This is known as radical innovation. services. process. Managing innovation types Understanding the difference between different types of innovation is important in learning how to manage it. The process is relatively low risk and high frequency. light-emitting diodes (LEDs) promise a radical replacement in the form of a long-lasting and energy-efficient alternative. often outside the mainstream of the organization’s workflow. offering a great leap forward. The development of most products tends to consist of long periods of incremental change punctuated with occasional radical breakthroughs. Plot on a chart with impact and implementation on the two axes. Radical changes in products. Score each idea in terms of impact and ease of implementation. Look at other high-impact ideas that may be harder to implement. Products and processes TIP CONSIDER ALL OPTIONS Keep reviewing the performance of your organization in all four directions. Process innovation can involve improving current processes—reducing waste. increasing efficiency—or changing the way you operate—such as switching from paper to digital correspondence. Product or service innovation can mean improving existing models—such as producing the latest CD player— or introducing something new—such as the first MP3 player. The four innovation directions CHANGING METHODS The process—the way you create and deliver the product or service. An organization can innovate its product.12 Understanding innovation Directing innovation In addition to incremental and radical changes. its process. The most obvious areas of innovation are in what you produce and how you produce it. so you are always aware of the potential for innovation. its market position. these give an idea of your “innovation space” and help you decide where to innovate. Together with incremental and radical innovation. or its business model. innovation can be defined by direction—by what is being changed. CHANGING WHAT IS OFFERED The product or service— what you offer to the world. . and global investments in R&D produce nearly $1 trillion of new knowledge every year. changed their business model to supply the trappings of a luxury lifestyle—vacations.. watches. . unable to compete on price with cheaper car producers. and processes. involving weaving together technological. as they can affect the structure of your organization. market. even the largest firms with big innovation budgets are increasingly aware of the importance of sharing knowledge.. luxury car makers such as Rolls Royce. Similarly. legal. However.Directing innovation 13 Markets and models Changing your business model and the market in which you operate may be more difficult. designer clothes—rather than simply a mode of transportation. IN FOCUS. The idea of “open innovation”—originally the title of a book by US professor Henry Chesbrough—is that firms need to open up their innovation search and share their own knowledge. services. OPEN INNOVATION Innovation has always been a multiplayer game. they can prove extremely profitable: cellphone makers at the turn of the century successfully transformed their product from a staid business tool into a mass-market fashion item with a strong youth market. CHANGING BUSINESS MODEL The business model—the way you think about what your organization does and for whom. financial. and other strands into creating new products. But in a world where markets are fragmented and globally spread. CHANGING BUSINESS CONTEXT The position—who you offer it to in the market and the story you tell about it. and to be able to identify those that are likely to fail. it has a history of innovation success in diverse fields: computer disks and tape. Most organizations would own up to having problems with making innovation happen. but paying attention to the key aspects can stack the deck in your favor. . It began in 1901 as the Minnesota Mining and Manufacturing Corporation—and its first attempts at establishing the business were not successful. and office products. It has spent a 100 years refining its approach to innovation—and continues to succeed in doing so. Best known for products like Post-it notes and Scotch tape. However. and built a business that today sets a goal of getting 30 percent of its revenues from products introduced in the past three years. Identifying successful innovations The history of product and process innovations is littered with examples of apparently good ideas that failed—in some cases with spectacular consequences. CASE STUDY Long-term innovation culture 3M is a world-class product innovator. It might not be possible to guarantee success every time. But the company persisted. It is important for any organization undertaking innovation to be aware of the factors that make innovations more likely to succeed. but by careful planning. including a fair proportion of ideas that are never realized. a great deal of research has gone into identifying the key areas on which organizations can focus to promote successful innovation. and new initiatives that flop more or less embarrassingly. innovation doesn’t happen by accident. medical supplies.14 Understanding innovation Innovating successfully Any innovation project involves a degree of risk—there is always the chance that it might fail. Remember. industrial coatings and abrasives. t
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. You should not attempt to limit innovation to research labs or in marketing meetings—it should be something to which everyone can contribute. While the inventor is a popular figure in marketing campaigns.16 Understanding innovation Innovation and invention Innovation is often seen as simply coming up with a bright idea. but by itself it is not sufficient. since innovation is a long process of making ideas work. In fact. As an innovative manager you need to be able both to encourage new concepts and find ways to help make them happen. many innovations come a long way from the initial idea before they become successful. Developing an invention Innovation is about ideas. Your creativity may be an essential starting point. anyone involved in a process at any level is likely to have ideas about how it can be changed and improved. but it is also about putting them into practice. even the most basic ideas can be worth considering. then you need to make sure that you have a plentiful supply of ideas to draw upon. but your task as a manager is to direct it to areas of your organization where it will be actively useful. Many organizations make the mistake of thinking that only certain people are capable of producing innovative ideas. . in fact. Moreover. And since innovation is mostly about incremental (“doing what we do better”) rather than radical change. and place the development of innovation in an area far away from the rest of the workforce. you can make use of this creativity at every stage of the journey. The idea is certainly important. TIP ENCOURAGE SUGGESTIONS Set up a suggestion box or an email address for employees to contribute their ideas. Encouraging creative input If innovation is about applied ideas. process. without taking forever or consuming a vast budget. This is not true: it does not matter how many interesting ideas are flying around the place if nothing useful comes of them. and service problems Focusing on technology and missing out on innovations . Managing innovation means balancing creativity with direction and control. HARNESSING CREATIVITY FAST TRACK OFF TRACK Supporting creativity across the organization Failing to implement good ideas Investing in research and development Creating new technologies without first ensuring they will be beneficial Listening to customers to find out what innovations they want Missing out on breakthrough innovations not yet conceived Building a strong internal innovation infrastructure Neglecting ideas from outside the organization Using technology to solve product. and on the other making sure the ideas are focused toward actually delivering results that benefits the organization.Innovation and invention 17 Balancing creativity and control Another widespread myth is that innovation is solely about creativity—that all that is needed is an environment in which bright ideas can be explored. Managing innovation is not only about unleashing creativity. TIP GET IDEAS REVIEWED Make sure all suggestions are reviewed by more than one person. It is a balancing act—on the one hand releasing the flow of ideas to create and sharpen up innovations. in case the initial reviewer misses any hidden potential. but also about harnessing and focusing it. particularly if you intend to make regular changes. TIP FIX THE STRUCTURE Make sure your innovation structure is fixed before a project starts. the idea is reviewed to decide whether it is worth pursuing further. Funneling innovation The standard structure for the innovation process is to take your idea forward in stages. The mouth is wide. in that many ideas can begin the process.18 Understanding innovation Making innovation happen Once your innovative idea has been conceived and selected as worth pursuing. It is important for any organization to have a standard process for developing innovations. and resources must be dedicated to the project. This testing process is often described as a sort of a funnel. but more and more ideas will be rejected at each stage as they are shown to be unworkable for one reason or another. The new-product development funnel OUTLINE CONCEPT DETAILED DESIGN TESTING LAUNCH . For every stage that it passes. time. At each stage. Only the very best ideas—those that are most likely to succeed—will ultimately make it into development. it needs to go through stages of development to make it a reality. and that all those involved are aware of the key stages. an increasing amount of money. HOW TO. but you must also establish procedures for reviewing the project at each stage— and sometimes in between stages—to ensure that it remains on track and is still worth further investment.. Fix points to assess projects before granting more resources. and knowledge. launch. The second stage is a detailed exploration of the practicalities—how the concept might work in practice. Finally. and trained personnel to make innovation projects progress. materials. skills. A decision must be made as to whether the idea has the potential to benefit your organization. and time to help you get it off the ground. which may include building a prototype. PLAN THE PROCESS Chart out a clear pathway along which innovation can proceed. Appoint a leader and team to take your projects on the journey. clients. At the same time. services. but even after launch its performance must be monitored to ensure your innovation provides the promised benefits. Fix key stages: initial idea. and researching how people in your target market (customers. once testing is complete. . Structuring the process Managing an innovation through this process requires a well-defined structure. the concept must be developed so that you can discuss and share it with others. testing. All of these procedures require resources. The first is the initial concept. not least because along the way you’ll have to convince some of them to provide funds. and processes.. especially if you want to repeat the process and keep on generating and implementing new products.Making innovation happen 19 Mapping the route There are four key stages that an idea must pass through before it enters the market or becomes a standard process. and your plan should include providing money. resources. development. and whether the predicted costs merit further investment. Not only must you establish each stage of the journey in detail. whether it is physically possible. indeed. Allocate resources: money. the product can be launched. or coworkers) react to it. and. The third phase is testing. time. and provide a support structure to make sure your idea continues to progress. radical changes in the business environment do sometimes occur. as the 2008–09 global financial crisis amply demonstrated. but also when they are going badly. It is not enough for a manager simply to cope with today’s challenges—you need to be thinking about the challenges that will face your organization in the near future.20 Understanding innovation Meeting challenges Innovation is about adapting to an environment that is always turbulent and often hostile. organizations tend to view the world in terms of what they expect. Contemporary business is extremely complicated. While. for the most part. Some current factors that have the potential to upset established business models include: t
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especially those with large populations . and innovation is essential to coping with them. It is vital for the innovative manager to consider not only how to innovate when things are going well. and seemingly distant changes can suddenly turn out to have a huge impact close to home. your organization can rely upon established models. Expecting the unexpected Like human beings. innovation managers should always try to answer the following questions: t
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different from anything you have done in the past? TIP RESEARCH CHALLENGES Be aware of areas in which proposed innovations could help make your organization both more vulnerable and more resistant to outside challenges. From Henry Ford working on “a car for Everyman. some of whom have become today’s major players. CHECKLIST PREPARING FOR CHALLENGES YES t

Does the organization’s management create “stretch goals” that provide the direction but not the route for innovation? t
Do you actively explore the future. leaving the door open for new competitors. To combat this. and make. connections across your industry to provide your organization with fresh perspectives? t
Do you have alerting mechanisms to warn you about new trends? NO . as unexpected challenges can prove life-threatening to an organization. or the revolution in the music and entertainment industry caused by Internet file sharing. And in each case. new business models are constantly emerging. and stock trading online from paper.Meeting challenges 21 Dealing with the unexpected Dealing with the unexpected is part of the innovation challenge—in some ways the most important part.” to the IT specialists who moved banking. making use of tools and techniques like scenarios and foresight? t
Do you have the capacity to challenge your current position— do you think about how your business could be adversely affected? t

Do you have strategic decision-making and project selection mechanisms to deal with radical proposals? t
Do you have. insurance. established players were severely damaged because they responded too slowly. Chapter 2 Planning for innovation Every organization needs to innovate to keep pace with a changing world. but scrapping those which looked good at the outset but which then failed to develop as expected. what. Developing a strategy An innovation strategy requires three key elements: t
Strategic analysis: what could you do. But unless you know where. and why would that make a difference? t
Strategic decision-making: what are you going to do. employees’ skills— and you need to spend these wisely if an innovation is to be worthwhile. and why you want to change. or an innovation strategy. and support and review it as the innovation takes shape? Some of the most important innovation decisions are not about starting projects. can help your organization stay ahead of the competition over the long term. time. and why are you choosing that option over others? t
Strategic action: how can you make sure the project happens. Innovating strategically Developing a roadmap for change. . Careful planning is essential for successful innovation. Any innovation project involves resources—money. your blueprint for innovation will come to nothing. TIP BACK UP YOUR DECISIONS Make sure all your decisions have sound strategic backing in line with the wide aims of the organization. And they need the discipline to manage what can be huge projects: to complete them on time and within budget. these clinics have become “best practice” centers for such surgery. to kill them off before they become potential high-profile disasters. which caused preventable blindness for around 45 million people. CASE STUDY Innovation with impact India’s Aravind Eye Clinics revolutionized treatment of eye problems like cataracts. We need focused change. to help prioritize changes you make to the ways you do things—or process innovation. and. if necessary. But through a systematic series of process innovations targeted at reducing cost without compromising quality.000 operations performed every year. This will help you to avoid a situation where you spend your energy improving irrelevant details while leaving the really important changes undone—a bit like rearranging the deckchairs on the Titanic. Once it’s clear what the challenge is. . But it is just as important to have a strategy inside the organization. targeted at what will make a real difference. Innovating across the board It is not just commercial organizations that need an innovation strategy. The operation to treat it is relatively simple but costs around $300—well out of the reach of the rural poor. BUILD A VISION Make sure people understand the “big picture”— what you are trying to achieve with innovation.Innovating strategically 23 Innovating internally TIP An overall innovation strategy matters if you are competing with other organizations in the marketplace. with doctors coming from around the world to learn from them. This sustained pattern of innovation continues. the average cost came down to $25. Our public services desperately need creative ideas for change to deal with problems like education. healthcare. they can contribute their creativity and energy to help make it happen. transportation—but simply spending scarce taxpayers’ money on any project that looks interesting is not a good recipe for long-term improvement in those services. and with around 250. innovation can be radical or incremental.24 Planning for innovation Modelling innovation To plan for innovation. targeting people who had never played computer games before. The innovation compass maps all these variables against each other. allowing you to work out where innovation efforts in your organization are concentrated. Using the innovation compass As we have seen. or business model. you could introduce a new product that opens up a new market. One useful model for this is the innovation compass. Defining your innovation The compass defines the “innovation space” your organization needs to explore to help move it forward. For example. process. while radical innovations are placed farther away. Each of the four points of the compass represents one of the innovation directions. and where they are neglected. A number of journeys can be taken. in order to apply resources and energy appropriately. you need some way to map the different possible directions. which plots innovation along two axes: doing things better. as Nintendo did with the Wii and the DS. but in combination. Or you could apply a radical procedure as McDonald’s did. and doing things differently. Plotting all of your innovation projects on a graph helps you direct innovation to the areas of your organization where it will be most useful. . opening up the fast food market by applying lessons from Henry Ford’s mass production process innovation in car making. Incremental innovations sit closer to the center. market. not just along the four main directions. and can proceed in one of four directions: product or service. . INCREMENTAL PRODUCT INNOVATION The first flat beds on transatlantic business class airline routes. INCREMENTAL MARKET INNOVATION Low-cost single-use shampoo packets for low-income Indian households. which began offering health advice over the telephone. RADICAL PROCESS INNOVATION Online banking and insurance made the delivery of financial services automatic and cheaper. which changed the music industry. Types of innovation INCREMENTAL PROCESS INNOVATION NHS Direct in the UK. RADICAL PRODUCT INNOVATION White LED (lightemitting diode) lighting that led to a shift in energy efficiency.RADICAL BUSINESS MODEL INNOVATION Apple’s iTunes and iPod systems. RADICAL MARKET INNOVATION Low-cost airlines that made flying available to a whole new market of flyers. INCREMENTAL BUSINESS MODEL INNOVATION Rolls Royce’s aftersales support that emphasized service and support. 26 Planning for innovation Applying strategic analysis The innovation compass can help you look at possible directions. but you also need to plan in ways that help you move ahead of your competitors. You can do this through a strategic analysis of your market situation. but order winners* are what determine whether people buy from you or not. Winning market share * * *Order qualifiers —factors that attract people to your product or service in the marketplace. Order qualifiers are your entry into the marketplace. more features. But when everyone offers the same price. More minds on the job improves your overall knowledge and helps build support for your decisions. . If your prices are twice those of your direct competitor. Building such profiles step by step can provide a focus for shared discussion and bring in different perspectives from across the organization. *Order winners —factors that determine whether people will buy your product or service. you are unlikely to do much business. Profiling your innovation One way to do this involves profiling the planned innovations against what the market wants and what your best competitors can offer. So you need to explore as widely as possible to get a “good” answer. sleeker design. In any marketplace. some basic requirements—”order qualifiers”*—must be met just to stay in the game. Strategy is rarely about “right” answers— there’s too much uncertainty about innovation to make that possible. what will differentiate your product is the something extra you offer—higher quality. Doing this well means collecting different views and information. You need to have an idea of both: whether your planned innovation is simply catching up (basic order qualifier) or moving ahead (creating an order winner). to see if your proposed innovations have the potential to give you an advantage. you are behind your competitor. KEEP UPTO-DATE Make sure you base your analysis on the most recent market research. use market research to plot them on a simple graph against their importance to consumers. so you either close the gap. and add the lines. This will give you a simple outline of where your strengths and opportunities lie in a given market. Then develop a scoring system for how well you and your competitors meet these requirements. In the example. or exit from the market.Applying strategic analysis 27 Plotting an innovation profile TIP Having identified the order qualifiers and order winners in your target market. What the market wants How well you actually perform FREQUENT PRODUCT CHANGES DESIGN SMALL LOTS DELIVERY RELIABILITY FAST DELIVERY QUALITY PRICE NOT IMPORTANT IMPORTANT Measuring your performance How well your best competitor performs . Sometimes. and how they would help your organization. Or you could use a more systematic approach. TIP DECIDE OBJECTIVELY Use some form of check on innovation projects before you start on them. Weighing the pros and cons The easiest way to do this is through a cost-benefit analysis—simply comparing how much benefit the idea will bring against how much it will cost in terms of resources. and justify that decision. That is a little like a gambler throwing the chips down randomly or backing a horse in a race because they have a “feeling” about it. because there is too much uncertainty involved—will the technology work. like entering a new market. .28 Planning for innovation Choosing the right options Using these ideas helps you see what your options are. You can never make innovation a cast-iron certainty. that you could then use in future projects. That might give you an overall feel for one project over another. or learning some new skills. but a more useful approach is some form of “decision matrix” that helps you compare many different alternatives on a number of cost and benefit dimensions. is there a market. Each option you pursue views opportunity costs in time and money. so it is important to select only the most promising ideas to pursue. But you still need to decide which of these options to choose. Will the reward you expect be worth the risk and cost of the project? Deciding where to innovate So how do you decide on this? You could just run with the ideas that attract you and act on your hunches. will the competition introduce something else before us? But you can convert the uncertainty into some form of calculated risk. looking at a project in just narrow cash terms may mean you miss out on some of its other potential benefits. C) along the X-axis. Most decision matrices use a “rough cut” version to knock out options with low potential. The matrix itself can be drawn as a simple table. then list the key checks along the Y-axis. depending on the range of criteria you want to satisfy. Add columns to rate the expected costs and benefits associated with the different projects.Choosing the right options 29 Formulating a decision matrix * The decision matrix allows you to give objective scores to each innovation option. You can continue adding cells. CHECKLIST MAKING A DECISION MATRIX :&4






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You may decide to back a couple of high-risk projects if they are small because they could move you to a new game— and if they fail only a small amount of resources will be wasted—but it would be foolish to base all your hopes of progress on risky ventures that may never work out. This requires analysis of potential obstacles against potential benefits. the potential rewards are also significantly more attractive.30 Planning for innovation Building a strategic portfolio All but the smallest organizations are likely to want to include more than one innovation project in their strategy. TIP HEDGE YOUR BETS Aim to reach a balance across your portfolio between risks and rewards. so that you have a mixture of probable successes and more risky—but potentially more profitable— experiments. Portfolio management helps you to achieve this. While a decision matrix helps you compare projects. More risky innovations are radical in nature. a safe innovation will be based on what your company does well. . you also need diversity in your innovation portfolio. Balancing your portfolio For a balanced portfolio you need a mix of decision criteria: the risk of failure must be balanced with the rewards of success. While the risks of such innovations are greater. The more resources a project requires. This chart gives you an instant view of what resources are allocated to what levels of risk and reward. you can see if you are putting too much investment in a safe bet that is unlikely to generate significant rewards. MANAGING YOUR PORTFOLIO FAST TRACK OFF TRACK The number of innovation projects in progress at any one time is limited There is no limit to the projects you can take on. BE FAIR Scrutinize all innovation projects equally and fairly. Do not start up a project just because one individual wants it to happen. but also in terms of how much you are allocating to each project. Equally.Building a strategic portfolio 31 Gaining an overview TIP It is useful to develop an overview of your portfolio not just in terms of the risks and rewards. This can be done by using a bubble chart. It can show you immediately if you have too many resources tied up in risky projects that are unlikely to succeed in the end. so you spread your resources too thinly Innovation projects have targets and are abandoned if targets are not met You are reluctant to kill off projects if they are not working out Priority is given to innovations that meet strategic goals Unimportant projects succeed at the cost of strategically valuable innovations Innovation projects are subject to careful selection You do not have a clear criteria for selecting projects . the larger its corresponding circle on the chart. which is generated by plotting your projects as circles on a graph against potential risk and potential reward. 32 Planning for innovation Promoting ideas for change Unless you are a top manager in your organization, chances are that you will need to “sell” your ideas for change at some point. Maybe you are an entrepreneur pitching an idea to a potential investor, or you have a great idea about how to make things work more efficiently in your organization. In either case, you will need support if your idea is to become a reality. Making the business case Whatever the starting point, the destination will be the same: you need to convince someone else that your idea is great and that it will work, and that they will get their investment (of time and money) back. And they need to believe in you and your capacity to deliver all of this. The problem is that you believing in your idea is unlikely to be enough—you need to put together a compelling business case to convince others that your idea has practical potential. TIP REHEARSE YOUR PITCH Practice “selling” your idea to others, inviting critical comments and suggestions for how to improve it. Anticipating the big questions before you make the pitch to decision-makers will help ensure your message gets across. Gaining support Organizations need to innovate, but they cannot do everything. They need to explore options and then make tough decisions about which ideas they will back and why. You can influence these decisions to your advantage—if you know your organization is trying to put together a portfolio of projects that balances risk and reward, you can try and make them include yours in the mix. But you need to present your idea in such a way that its merits are clear. Ask yourself how you can engage them—can you show them a prototype so they can add their comments? Do you have the answers to questions they might ask you? And do you come across as being passionate about the project—will they believe in you? Promoting ideas for change 33 Covering all the angles Making a compelling business case is at the heart of innovation. Decisions will not get made on the basis of personality and passion alone—you need to be able to convince decision-makers to spend resources on a project that will work. Is there a market, will the technology work, can you protect the idea, what will it cost, and what are the likely benefits? Showing that you have thought the project through and have answers to any difficult questions they might throw at you will enhance your chances of a successful pitch. BUILDING A GOOD BUSINESS CASE FEATURE WHAT TO INCLUDE Outline your idea A short and simple explanation of your idea—how it is new and what it will do. Remember it is not what you think but how “they” see it, so try and present it in terms of what it will do for them. You might try mapping it on a strategic position map. Market analysis Who is it targeted at? Who wants it, why do they need it, and why don’t they have it yet? How big is this market? Is it growing, declining, or static? Competitors Who else is out there, what do they offer, how will this idea get ahead of them, how might they react, and how do you protect yourself from that? Why it will work What do you know, and what prior knowledge, skills, experience, and networks can you bring to the table? Rewards What will you get if you succeed—money, market share, customer satisfaction—and how long you will have to wait until you get them? Costs How much will it cost, and what do you need to make it happen? Risk factors What might pose problems and how will you get around them? Project management Who will take this forward and how? What reassurances can you offer that you can do it? 34 Planning for innovation Making real-time decisions INITIAL TRIGGER An idea for a new product appears. Should it be explored further? Innovation is about uncertainty, and so the ability to review and change your decisions over time is crucial. To make a decision and then commit all of your resources to it without having the option of changing plans midway is risky. The longer a project goes on, the more resources are put at risk if it fails. Allocating resources Smart organizations know that turning an idea into reality is a CONCEPT DEFINITION Information sought on learning process. As you move technology, markets. Does through the project you discover it make business sense? new things about the technology, about the market you thought existed, about your competitors. So it makes sense to view the journey in stages, and to increase resources allocated at each stage, from outline concept through to the eventual launch of the product. Using stage-gate reviews A widely used approach, originally developed by Robert Cooper, a Canadian professor, is to introduce strategic decision FEASIBILITY STUDIES Market surveys are points at various stages in the process. Instead conducted. Should it enter of making a one-time decision at the start, full-scale development? this “stage-gate” approach sets up a series of decision points, each tougher than the last. Key questions are asked at each stage, and only if the answers are met does the gate open so that resources flow to support the next stage of development. Should it enter full-scale production? . DESIGN DEVELOPMENT Prototype developed.A sample stage-gate model DECIDING TO LAUNCH Final go-ahead for mainstream manufacturing and marketing. Chapter 3 Making innovation happen Innovation is more than a great idea—innovation succeeds only when you put that idea into action. . but if you are going to repeat it. and why?” You need to select—to make choices based on where you are trying to get to as an organization and how the proposed innovation might help you get there. But you can’t do everything—you need to be able to answer the question: “Of all the things we could do. Moving toward innovation You can look at innovation as a journey: from the spark of a new idea to seeing that idea realized in the form of a new product. what are we going to do. catching up with a competitor. you need to put in place a systematic process to make it happen consistently. or workflow. the challenge in managing your innovation process at this stage is to make sure you have in place ways of searching for and picking up the signals. put them into operation. a customer need. Whatever the stimulus. Finding and selecting ideas The journey starts with a trigger signal—a bright idea. TIP BUILD A ROADMAP FOR THE JOURNEY Mapping out how you will take the idea ahead helps identify potential problems and who or what else you will need to help deal with them. You could get lucky with it once. service. The innovative manager needs the ability to find and select good ideas. and persuade users to adopt them. if necessary. or if there will be a market for your new product or service. and. If you are really going to make this an innovation system—one that delivers a steady stream of new products. Reviewing the system When you have gotten as far as a working model or a prototype of the new service or process. You won’t know whether you can actually make the technology work. In the late 1980s. but against a background of uncertainty. .. to bring the new way of doing things into shape. IN FOCUS. 3M’s Post-it notes began when a polymer chemist mixed an experimental batch of adhesive that turned out to be quite weak. stop projects before they go too far ahead. you have the challenge of implementing the innovation possibility—to make the new product or service come alive. until you try to make it happen. you need to make sure people will actually adopt it. processes. Although it showed little benefit in clinical trials on humans. So you need a structure that allows you to monitor progress. Not every new idea finds a home. the team pursued an interesting side effect that led to UK-92480 becoming the drug Viagra. This is all about project management.Moving toward innovation 37 Implementing ideas Next. and services—you need to make sure you learn from your mistakes and modify the system so you can do it better the next time.. This failure in terms of the original project provided the impetus for what is now a billion dollar product platform for the company. and the challenge at this stage in the process is making sure you can get sufficient uptake to make a difference. scientists working for Pfizer began testing compound UK-92480 for the treatment of angina. LEARNING FROM MISTAKES Sometimes great ideas come from mistakes and apparent failures. Use stakeholders’ ideas for new perspectives. as a driver of process innovation. Pushing the frontiers New developments in science have always pushed the frontiers of knowledge and created opportunities for innovation. Market research is one good source of this. Getting close to actual or potential customers and understanding their needs will help you understand user needs. Working with other organizations will help you share the costs and risks.. SEARCH FOR IDEAS Explore existing technology to find opportunity. HOW TO. and to manage it effectively you must have mechanisms to pick up on these pressures.38 Making innovation happen Looking for ideas The first stage in practical innovation is gathering ideas for new projects. as are customer service and complaint records. Look at threats and opportunities for your business. Innovation can be triggered by many different pressures. Research the potential market for your product.. These can come from within your organization. Meeting demand Necessity is the mother of invention. Pay attention to sources of frustration highlighted by your workforce. With nearly $1 trillion being spent every year on R&D around the world. Needs are not just about external markets for products and services—demand pull works inside the organization as well. the problem is less one of knowledge creation than one of tapping into existing research. Use the Internet or “knowledge brokers” to help cast the search net widely. Conduct your own technological research—creating new knowledge—or tap into research being done elsewhere. and plan innovation to ease them. Investigate your competition and learn from them. . so making sure you understand user needs will help you pick up clear signals for innovation. or from the wider world. such as at universities or research institutes. it has now committed to sourcing half of its innovations from outside the company. and employed more than 7. For example. and picking up on other people’s ideas in the most unlikely of places. In doing so. keep monitoring not only expenditure and performance. that had developed a special edible ink and a spraying process for the ink. sharing its unused ideas with a wider world. Italy.Looking for ideas 39 Getting ideas from users A potential source of innovation can be frustration: the frustration experienced by users who want something additional or different from the products and services they use.000 people to carry it out. it has had to develop completely new ways of working. use suggestion programs to capture employee ideas. Linux is not a product developed by a large corporation. but emerged on farms where farmers had bought the early trucks. Use web communities—or “crowd sourcing”— to help create ideas for innovation or improve on what is already there. and they continue improving and updating it. stripped out the seats. but also its continuing relevance to end users. CASE STUDY Getting ideas from outside Procter and Gamble (P&G) used to spend around $3 billion each year on technology research. Work with “lead users” to capture their insights and prototypes. but the result of collaboration among a community of users who wanted software that better suited their needs. TIP REVIEW RELEVANCE As your project progresses. However. This can be channeled to create ideas and prototypes for innovations. Going to an older example: the pickup truck was not invented in Detroit by the large American car companies. For example. taken off the roof. . and improvised a truck more suited to their farm needs. the idea of Pringles potato chips having messages printed on them was made a reality not by P&G research scientists but by connecting with a small bakery in Bologna. Otherwise you may find yourself with a perfectly executed innovation that your customers no longer want. During process innovation inside the organization. The connection was made through one of the increasing number of Internet knowledge broker sites—a kind of eBay for innovation. Tapping the future Looking at a selection of alternatives often provides clues about new innovation possibilities. Remember that innovations can come from any area. You could gather panels of experts (also known as “Delphi panels”) to discuss the most likely outcomes of current events and help you tailor your plans to expected developments. You can even write your own “science-fiction” stories about alternative futures to explore the possibilities. .40 Making innovation happen TIP CONSIDER ALL FACTORS Take account of current events in your future planning even if they do not seem to affect you directly. and how your organization might respond to them. Tools you can use to do this include trend extrapolation—where you research market or performance trends and make future plans on the assumption that those trends will continue—and forecasting tools such as economic planning. A final source of ideas are your own mistakes. Compare your products and processes with those of other firms systematically and regularly. you may choose to collaborate with them directly to develop new ideas. and those of your competitors.Looking for ideas 41 Benchmarking for improvement Finding inspiration from outside Looking at what other companies do and comparing them to your own organization can give insights into new directions for product. You can also work closely with lead users— clients.. In addition to benchmarking by observing other companies. HOW OPEN TO INNOVATION IS YOUR ORGANIZATION? t

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DVMUVSF . however. In practice. since things cannot move to the next stage until they have completed the previous one. It is also a slow process. risks missing out on key knowledge inputs from different groups. This is where tools like prototyping are useful.48 Making innovation happen Diffusing your innovation A great idea implemented perfectly will be of no use to your organization if no one adopts it. To manage your innovation journey to the end. and play with an idea before it is finalized. and building their ideas into the final innovation can help kick the adoption curve upward. A key message from this is to work with potential early adopters at as soon a stage as possible. Getting them involved in testing and trials. touch. A graph of percentage adopters against time takes on a characteristic S-shaped curve. learning from their feedback. Understanding adoption TIP IDENTIFY EARLY ADOPTERS Keep an eye out for people willing to engage with new products or processes and invite them to participate in testing. A new product must be bought by customers if it is to succeed in the marketplace. early bird beta market feedback prototype trial version . They are gradually joined by more and more users until the last few percent trickle in at the end of the process. so you can get their reactions and ideas to help improve it. giving potential adopters the chance to see. and a new procedure must be followed by employees for it to have any effect. be sure you’ve done enough to make people adopt your new idea. The process is cumulative: initially only a few people take a new idea on board. No innovation is adopted all at once. The same principle holds for process innovations inside the organization—changes in “the way we do things around here. two different regions could be used. preferences share try adopt potential product test . invite those involved in the testing to help train and support new users.” Getting the ideas and insights of people who will be using the new process is an ideal way of improving the final design of the process as well as smoothing the route to change.Diffusing your innovation 49 Getting people involved “Test marketing” of a new product or service helps explore customer preferences that provide information about things like pricing policy or advertising. and the personality of the innovator. Such testing also offers the chance to test different launch strategies—for example. the characteristics of the adopter (some communities are more receptive to change). and checks if people really want the new offering. TIP MAKE USE OF TESTERS When implementing a new procedure. Maximizing your chances Three factors determine the speed at which an innovation diffuses: the nature of the innovation (radical innovations are adopted more slowly than small ones). each employing a different launch strategy. It makes sense to allow more time and resources to promote a radical change in a conservative community than a small change in a flexible workforce. Balanced against this is complexity: the more difficult people perceive the innovation to be (the more complex the procedure. Understanding early adopters Innovation adoption is a complex negotiation between proponents of an innovation and the people they want to use it. MAKE A NEW IDEA POPULAR Widely publicize the benefits before launch. Some people can be relied upon to be enthusiastic and try out new products. Try to minimize any mismatch by developing variants for different groups of user. The first is relative advantage: how much better the new innovation is perceived to be. and may also come up with ideas for improvement. Other important factors are visibility—it can be useful to offer demonstrations of the benefits of your new idea—and whether it can be trialed—training and trial runs are important to help users come to terms with new products and procedures. the more technical the product) the less likely they will be to adopt it. and should be targeted because if you can appeal to them and meet their needs.50 Making innovation happen HOW TO. others are likely to follow. working with prototypes and beta versions. or training sessions. Finally. Listing characteristics Certain key characteristics greatly affect how easily an innovation can be diffused. Get early users to persuade other people.. while others will resist changes to their settled preferences. Your best friends will be innovators—cutting-edge users who are always willing to try new products and processes. They are often open to good new ideas. People will be more eager to adopt an idea if its benefits are obvious. the product must be compatible with the market—it must fit the people who you want to adopt it. trials. They can be recruited during testing stages. Use your user feedback to adapt innovation. The next are early adopters—trendsetters in a community whom others imitate. . Offer sneak previews.. To accelerate diffusion of your innovation you need to know the types of adopter and what motivates them. You can best reach them by promoting positive experiences reported by earlier adopters. Positive experiences by early adopters can encourage the early majority to come on board.Diffusing your innovation 51 Understanding slower adopters The early majority is the large group of people ready to adopt an innovation when it appears to be taking off. wishes. Finally. SELLING YOUR IDEA FAST TRACK OFF TRACK Communicating in terms that your prospective users recognize Use jargon and specialized language Understanding their world— seeing the innovation through their eyes Making assumptions that they can see the benefits the way you do Listening to their concerns—and if possible build their ideas. A lot of effort will be required to convince these people. and you may decide to leave them be if 100 percent adoption is not essential to your innovation. any community will include laggards—a few people extremely resistant to change. and needs into the final version Presenting them with a “take it or leave it” solution and ignoring their feedback Developing a relationship with them: engage them as partners in the development of the innovation Treating them as passive end-users and expecting them simply to do as they are told . The late majority consists of the more conservative members of the group who are only prepared to change when they can see a large population already successfully using the innovation. and when they witness the advantages enjoyed by early adopters. Laying the foundations The innovation system provides the structure for an idea. Successful entrepreneurs and innovative organizations know this. and creating solutions. but it is people who actually make it progress. and use a range of structures. Avoiding chaos Blueprints for an innovative organization will highlight the need to eliminate stifling bureaucracy. just throwing people at the innovation challenge is not enough: you need to provide a context in which they use their creativity and share their ideas. informal. .Chapter 4 Building the innovative organization Innovation is about human creativity and ingenuity—piecing together a puzzle. * *Skunk works— a group within an organization whose role is to work on advanced projects and develop prototypes with minimal restrictions. unhelpful structures. and strategy directs it. However. tools. and techniques to balance formal and organic structures. and these types of organizations can often end up obstructing successful innovation. communication barriers. solving problems. and other factors that stop ideas from getting through. But you must be careful not to fall into the chaos trap—not all innovation works in loose. Developing and implementing new ideas can work only when backed by an innovative organization—one geared to change. or “skunk works”*. and organic environments. Cooperation across team boundaries is essential. so that ideas can be shared.. as well as communication up and down the hierarchy. DOES YOUR ORGANIZATION PROMOTE INNOVATION? t

Does the organizational structure facilitate innovation rather than stifling it? t

Do people work well together across departmental boundaries? t

Is there a strong commitment to training and development of people? t

Are our people involved in suggesting ideas for improvements to products or processes? t

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Is communication effective.Laying the foundations 53 Balancing the structure There are a number of considerations that can help you to strike this balance. and all team members are encouraged to contribute. since this will help them generate ideas and take on new processes easily. rather than treating innovation as a job for the experts. Good communication across the organization is equally important. and does it work top-down. ASK YOURSELF. TIP TRAIN YOUR EMPLOYEES Make sure your staff receives necessary training to understand the innovation processes in which they are involved. The structure of individual teams is also important. and across the organization? t

Does our reward and recognition system support innovation? t

Do we have a supportive climate for new ideas. First. and no one feels left out as an innovation moves forward. since input from many different skill sets will be needed to implement a new idea—this cannot be achieved if each department operates on its own. Effective team-working means that ideas are discussed and developed within a team.. so that people do not have to leave the organization to make them happen? t
Do we work well in teams? . rigid hierarchies can stifle new ideas. Ensure that all teams are aware their input is welcome. bottom-up. as employees at lower levels find themselves unable to pass their suggestions on to management. while an appropriate structure is essential for an innovation idea to progress. TIP REWARD INNOVATIVE THINKING Develop a recognition-andreward program for those who contribute to a successful innovation. don’t fix it. 3M has around 50. creating the right culture is the biggest challenge. On the other hand. There is a deliberate attempt to create a sense of company history based on valuing those people who challenge the system. CASE STUDY A culture of innovation 3M is often cited as an example of a consistently successful innovator that draws on what is clearly a highly innovative culture. Discourage the attitude that current systems are perfectly fine. from seed money to greater resources. a more open culture in which mistakes are treated as opportunities to learn and develop new strategies. . or “if it ain’t broke. Although it is famous for encouraging people to explore ideas not relevant to their main jobs. An organization that operates a blame culture—in which mistakes are punished and instigators of new projects are made scapegoats when they fail— will discourage innovative thinking. will be more likely to encourage innovation. to encourage all employees to participate in the process.54 Building the innovative organization Setting an innovation culture Any organization has its own particular patterns of behavior that are underpinned by values and beliefs—its organizational culture. this is only one element of a complex culture.” so that employees are constantly thinking of how their processes could be improved.000 products and yet is so confident in its ability to innovate that it sets the goal of deriving a third of its sales from products introduced in the past three years. and a policy of encouraging “bootlegging” behavior—progressing innovation projects that might not have received official sanction. If you want to develop an innovative organization. It also allows people to progress their ideas through stages of funding options. if the Board is convinced by the proposal. Encouraging employees Your employees must have the right attitude in order to come up with and develop innovations. Managers should support and communicate with workers throughout the company rather than remaining distant. so that new ideas can originate at any level. Sharing your vision of the company’s future. and how innovation contributes to that vision. CREATING AN INNOVATIVE CLIMATE FACTORS HOW IT INFLUENCES INNOVATIVE BEHAVIOR Motivation t

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DPNQBOZ .Setting an innovation culture 55 Leading the way Managers should also take a positive approach to creative ideas rather than expecting employees to just do as they are told. will encourage employee participation. Allow creative thinkers time and space to consider problems at length. And make sure that you give your staff a sense of freedom to try out different ideas. . and make sure they obtain experience in finding and solving problems. t
&YQMPSBUJPO examining different potential solutions. even if they don’t always succeed. t
*OTJHIU the moment of connection. Thinking creatively Creative problem-solving is a process psychologists have studied for years. review and analysis should follow validation. getting the bugs out of the system. Scaling up. Understanding the creative process helps you to develop it in your organization. In a business context. TIP IMPARTING THE SKILLS Creative problemsolving is a skill like any other. t
7BMJEBUJPO further examination of the idea as it is implemented to make sure it really is the solution. complex ideas that develop over time.56 Building the innovative organization Fostering creativity Creativity not only generates the ideas that start an innovation. Provide spaces for employees to develop their ideas—quiet rooms where individuals can concentrate. when an answer comes to you that you feel will resolve the problem. Enhancing creativity There are a number of proven strategies to enhance creativity in your organization. and group discussion areas where staff can gather to explore problems. If not. Provide training to your employees. Building diversity will ensure that you have several perspectives available on a problem. and revising prototypes all require creative input. There are four stages: t
3FDPHOJUJPO realizing you have a problem to solve. to ensure the problem is solved. These may be obvious answers. but also the means of fixing problems along the way. the cycle repeats until an answer emerges. or they may be tough. These can be used by individuals. IDENTIFICATION Fishbone (or “cause and effect”) diagram— exploring the root causes of a problem and its contributing factors REDEFINITION Goal orientation—restating the problem to focus on what you are really trying to solve Perspective—looking at the problem differently EXPLORATION Brainstorming—pooling ideas from a team Radical ideas—encouraging wild thinking Random link—forcing a random connection SELECTION Voting—a simple vote to choose the idea Implement-ability matrix—plotting your ideas on a chart to compare the payoffs they offer IMPLEMENTATION AND REVIEW Measure and compare—reviewing an innovation project once it has been implemented to measure its success . but most are more useful as part of a general meeting to enourage ideas.Fostering creativity 57 Using creative tools The good news is that there are many tools available to help you tackle the stages of the problem-solving cycle. There are two types of resistance to change: the type you can tackle directly (by training people in new skills. they are worried about losing timely (before the their jobs. ACTIVELY they are scared it will require them Communication should to do things of which they do not feel be active. BE SUPPORTIVE Create an atmosphere in which individual concerns can be aired. . You can address this only by creating a supportive climate where your employees can discuss and come to terms with their concerns. and dealing with the sources of that uncertainty. and capable. while others resist any change at all.58 Building the innovative organization Managing change Implementing innovation means changing things. It is important to understand the reasons for this resistance. Understanding resistance Not everyone is against change—some view it positively. they do not see what is in practice. and ideas within the organization used positively. whether they are correct or not. especially in their working conditions. Getting people on board Change management is about understanding that uncertainty about change is natural. open. If someone feels their job is changing for the worse. for example). in it for them. and the type that is emotional and maybe irrational. This could be due to several factors: COMMUNICATE they do not see the need for change. and manage changes to minimize user uncertainty. they fear they will lose control change occurs). and above all. that will shape the way they see the change. two-way over their work. and many people are resistant to change. or they feel overloaded with what they already have to do. to help employees feel ownership of it. you ensure commitment to it and improvement in design. continued improvement. SET CLEAR TARGETS Giving people clear goals and milestones will help them feel more confident about changes.HAVE A CLEAR STRATEGY Develop a vision and share it with the rest of the organization. ENCOURAGE INVOLVEMENT By allowing participation early in the change process. and in creating a change-oriented organization. . Changing tracks effectively INVEST IN TRAINING Training is important for developing skills. Denny’s Shipyard in Dumbarton. .. the difficulty lies in keeping it going long enough to make a real difference. and then see it gradually ebb away until there is little or no CI* activity. IN FOCUS. To paraphrase one manager.” It makes a big difference to firms like Toyota that do this on a systematic basis—it receives around two million suggestions a year from its workforce (Kawasaki Engineering.. Either way. Many organizations start the process.60 Building the innovative organization Involving employees Creativity comes as standard equipment with everyone who works in your organization. have an initial surge of ideas and enthusiasm. Scotland. with every pair of hands there comes a free brain. empowered. This isn’t surprising—to change the way people think and behave on a long-term basis requires a strategic development program. HIGH-INVOLVEMENT INNOVATION High-involvement innovation has been around for a while. * *CI—continuous improvement: a steady stream of incremental innovation. One of the most powerful engines for change in organizations is mobilizing the efforts of employees to deliver this. Once you have started the innovation process. The extent of involvement depends in part on whether the planned innovations are radical (high impact) or incremental (low impact). back in 1871 asked—and rewarded—workers for “any change by which work is rendered superior in quality or more economical in cost. another high-involvement player. employees must feel motivated. The challenge lies in engaging this creativity— or how to tap into this resource to keep making innovation happen. has a staggering seven million)—and it implements the majority of these. and enabled to contribute if they are to help in innovation. Involving over the long term An organization can choose to involve all employees in innovation (high involvement) or only a few (low involvement). Strategy deployment. and training employees to use it. and organizations may actively restrict the opportunities for innovation to take place. but there is no attempt to build on this. 2   At level two an organization attempts to mobilize involvement. and monitoring and measuring are required for this. You can use this model to identify the stage your organization has reached. 1   At level one innovation is random and occasional. 3   At level three high-involvement capability is coupled with the strategic goals of the organization. and what needs to be done to progress toward higher involvement. This needs a formal process for finding and solving problems in a structured and systematic way. 4   At level four high involvement produces profit. This requires an understanding of. overall strategic objectives. . People do help to solve problems. 5   At level five the whole company is involved in experimenting with new ideas and improving processes.Progressing in stages Involvement in workplace innovation develops in five stages. Individuals and groups need to be empowered to innovate on their own initiative. and commitment to. so that improvement activities of teams and individuals can be aligned. in sharing knowledge and creating the complete learning organization. There are two ways of encouraging these ideas—appealing to specific users who are likely to contribute. communities of practice are small. to help shape your idea while you develop it. If they reject your idea. Lead-user methods help you identify early adopters among your user base. such as the Linux community. music software groups like Propellerhead. and Apple’s i-platform devices group. and second. and encouraging contributions from the entire user base. First. often volunteer. and allow them to add their own. their ideas can help make a better innovation. groups of users that use innovative solutions on a continuing basis. it may not be worth pursuing. they will have plenty of ideas about how they would like to improve or change what they are using. . Changes to the way people work can tap into their ideas about how the process should improve.62 Building the innovative organization Involving customers Everyone is creative—and that includes the end users of your innovation. Finally. for two good reasons. as a sounding board. TIP LISTEN TO COMPLAINTS Pay attention to negative reactions from test users. and. if you involve them they will buy into the idea. Otherwise. later. Prototyping and test marketing let you observe users’ reactions to new ideas. Users are not simply passive consumers of new products or services. Asking the best users Focus groups identify users and their interests as an input to innovation design. they may find ways to resist the change. These users do not have to be limited to customers—the same applies to process innovation. Appreciating user involvement An important theme in managing innovation is learning to work with users as co-creators of innovation ideas. Kellogg. companies like BMW. and for them to contribute ideas easily. user-driven components of the Internet—to allow users to interact and provide their ideas to design and co-create products and services. Increasingly. Even simple arrangements like competitions and challenges can be a useful way of capturing user ideas focused on a particular challenge or target. whose mi-Adidas platform lets you design your own shoes. . widening your potential pool of ideas. where users can design their own Lego toys. and the Lego Factory website.0—the interactive. opening their doors to ideas from users by using the Internet to capture and review these ideas. Crowd-sourcing uses Web 2. especially if they are distributed over the Internet to encourage a large number of participants. Examples include Adidas. and Unilever are creating virtual innovation agencies.Involving customers 63 Inviting ideas online The Internet has made it possible for vast numbers of users to be contacted effortlessly. Innovation networks allow you to share resources and reduce potential risks of developing new products and processes. and no organization operates in isolation.64 Building the innovative organization Networking for innovation No person exists on their own. However. ASK YOURSELF. and access to knowledge sets and experience outside those in your organization.. Innovation has always been a multiplayer game. For small firms. even larger firms are increasingly realizing how important a resource this can be. Linking up in networks means they can tap into each other’s resources. and adopting innovation network tactics accordingly. ideas. and knowledge.. HOW DEVELOPED IS YOUR CAPACITY FOR NETWORKING? t

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Motivation: how members are motivated to join and remain within the network. such as: t
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Information processing: how information flows among members and is managed.Networking for innovation 67 Managing the network When the network is operational. t
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Knowledge management: how knowledge is created. who) decisions get made at the network level. t
Decision-making: how (where. or they can continue for as long as members see it worthwhile—this may require periodic review and “retargeting” to keep motivation high. TIP AGREE ON THE TERMS When setting up an innovation network. t
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BCPWF Measuring your own performance In addition to organizational targets. Learn from your mistakes.. and encourage experimentation among your staff. it can be useful to monitor your own performance as a manager over the course of an innovation project. 21. 41. 69 stages in workplace 61 computer-aided design 47 GH concepts 19 goal orientation 57 strategy 22–3 conflict resolution 67 hedging your bets 30 threats to 21 consumerism 20 Henry Chesbrough 13 continuous improvement 47. 42. 50–51. 30 innovation balancing your portfolio 30 “Delphi panels” 40 and invention 16–7 benchmarking 41 Detroit 39 basics of 6–7 beta version 50 developing ideas 44–7 categorizing 10–11 Bic 10 digital commerce 20 culture 54–5 blame culture 54 early adopters 48. 48–9 creativity 6. 24 innovation compass 24–25 cost-benefit analysis 28 high-involvement innovation innovation journey 36. 58–9 business model innovation 12–3 employee suggestions 16 in organizations 52–3 business strategy 29. 18 Ford Edsel 45 profiling 26 comparing projects 30 forecasting tools 40–41 reviewing 45. 16–9. 65 managing 7. 62. 62. 42. 63 implementing ideas 37 customers 19. 58–9 62–3. 68 improving skills 68–9 incremental innovation 10–12. 60–61. 43–9. 25 innovators 49–50 . 54 competing on price 13 funneling innovation 18 risk 14. 32. 32–41. 42 employee training 53 in practice 16–7 end users 51. chaos trap 52 F measuring 68–9 climate change 20 fast-track projects 44. 46 networking capacity 64 collaboration 41 feedback 48. 57. 60 cross-functional involvement 47 I ideas 7. 52–3. 46–7. 67 information processing 67 Aravind Eye Clinics 23 decision matrix 28–9. 64–5 crowd sourcing 39. 62 making it successful 14–5. 60 Henry Ford 21. 55–7. 55 budgets 17. 55. encouraging 54 ground rules for 42 business case 32–3 employees. 60 44–5. 62 decision-making 21. 66 C change management 43. 65 complexity 50 16. 69 competence base 29 full-scale production 35 rewards 31–3. 50–51 bubble chart 31 edible ink 39 directions for 12–3. 50–51 dealing with challenges 20–21 BMW 63 early involvement 59 definition of 6–7 brainstorming 57 economic planning 40 diffusing 48. 58 file sharing 21 plotting a profile 27 communication barriers 52 financial crisis 20 portfolio 11 communities 49. 24–5.70 Index Index AB Adidas 63 adopting new ideas 36–7. 52. 36–7. advertising 49 DE Apple 25. 45. 48 creative problem-solving 56 60–61 stages of development 18–9 types 11. 56–7. 44 emerging markets 20 from frustration 39 bureaucracy 52 employees. 64. 14. focus groups 62 process 7. 52. 44. 64. 50–51 options 28–9 communication 53. 15–7. 24–5. 18–9 entrepreneurs 15. 17. involving 60–61 implementing 43. 30–33. 23. 24–5 shared learning 66 19. managing 67 S networks 41. 21. 52. 42 LEDs 11. 14. 47 sustainable energy 20 Propellerhead 62 T managing implementation 46–7 prospective users 51 target market 19 managing risk 43 prototypes 19. 56. 23 R market potential 38 radical changes 20. teams 15. 45–7. strategic analysis 26–7. 12. 37 sourcing ideas 39 lead users 39. 24–5 project management 37. stretch goals 21 low-involvement innovation 60 M 19. 62 market analysis 33 marketing 16. 37–9. 62 strategic implementation 43 Lego 63 Procter and Gamble (P&G) 39 strategic selection 42–3 Linux 39.0 63 online banking 25 Scotch tape 14 web communities 39 open innovation 13. 49 test marketing 49. learning from 37 Toyota 60 motivation 55 real-time decisions 34–5 training 58–9 MP3 12 relative advantage 50 trend extrapolation 40 MPEG 65 research 14. 46 market innovation 11–3. 37. 50 Murphy’s Law 44 resistance to change 58–9 music industry 21 risky innovation 30 UVW Robert Cooper 34 uncertainty 28. 32. 38–9 trials 48. 49. 41 practical innovation 38–9 specialized knowledge 11. 53 50. 24 “skunk works” 45. 25 Unilever 63 NO networking. 54 testing 19 24–5. 64–5 telecommunications 20 market position 13. 3M 14. 64–7 safe innovation 30 Viagra 37 NHS Direct 25 scaling up 56 waste disposal 20 Nintendo 24 scenarios 21 Web 2. 47. 34–5. 47. 62 McDonald’s 24 radical innovation 11–2. 43–4. 38–9. 55 Post-it notes 14. 44. 52 launching 19. 25 service innovation 11. 49 portfolio management 30–32 slow adopters 51 leadership 15. 16. 64. 23–4. 60 mistakes. 49. 28. 39. 35. 24–5 public services 23 technology 17. 55 problem-solving cycle 57 stage-gate model 34–5 learning networks 65 process innovation 8. 62 product development 65 strategy 59 low-cost airlines 25 product innovation 9. 63 organizational culture 54 self-service shopping 11 iPod and iTunes 25 organizational targets 69 selling your ideas 32–3 KL P Kawasaki Engineering 60 performance review 12 Silicon Valley 65 Kellogg 63 pickup truck 39 simultaneous engineering 47 knowledge brokers 38 planning 14–5. 10. 34.Index 71 intellectual property 9 opportunity costs 28 selecting ideas 36–7 Internet 11. 14. 12. 41 learning 15. 19. 37. 16–7. 10. 45. 69 sectoral network 65 Wii 24 user needs 38 . challenges to 66 user ideas 63 networks. 58 Rolls Royce 13. to place an acknowledgment in future editions of this book. The publisher apologizes for any unintentional omission and would be pleased. Pgiam 63. Keller 57.com: Karl Dolenc 1. Primary Picture 12. All other images © Dorling Kindersley For further information see: www.dkimages. Corbis: Creasource 59. Alexandr Tovstenko 25.com Picture credits The publisher would like to thank the following for their kind permission to reproduce their photographs: Every effort has been made to trace the copyright holders. RK Studio / Kevin Lanthier 14-15. Ludsam 68. Pete Turner 61. Sergey Galushko 30. Michael A.72 Acknowledgments Acknowledgments Publisher’s acknowledgments The publisher would like to thank Margaret Parrish for coordinating Americanization. webphotographeer 35 Jacket images: Front: Getty Images: Oliver Cleve . Soubrette 20. Dieter Spears 40. Lise Gagne 66-67. Getty Images: artpartner-images 8-9. iStockphoto. Anatoli Styf 4. in such cases. Sarah Fields 45. Hugo Lacasse 48-49.